THE first signs of an easing in global protein production are emerging, with trade tensions, high feed prices and African swine fever all taking a toll.
The global appetite for beef and lamb, however, is showing no indication of coming off the boil, thus combining with limited supply to underpin strong livestock prices next year.
Big Agribusiness outfit Rabobank’s flagship annual outlook for the animal proteins sector forecasts a slowing in the pace of growth for meat production in most regions throughout the world next year.
Global animal protein production, primarily beef, pork and poultry, is expected to expand by just over one million tonnes in 2019 – well below the five-year average growth rate – to some 500 million tonnes.
It’s the first time in three years the growth rate has slowed.
Brazil is running against the grain, with a continued strong growth trajectory, while the production outlook for North America is also relatively strong, according to Rabobank.
With cattle inventory in Australia forecast to remain very low following heavy destocking between 2013 and 2016, and then again this year, on account of dry conditions and limited feed, the effect of the global dynamics should be strongly felt on sale day.
Rabobank expects Australian beef production volumes to fall with lower slaughter numbers and, consequently, export volumes to decline slightly in 2019.
However, while it’s good news on the price front, both producers and those further along the supply chain will be tested next year, Rabobank senior animal proteins analyst Angus Gidley-Baird said.
Lower volumes for feedlots and processing will squeeze supply-chain efficiencies while on farm, already-limited and expensive fodder will be hardfelt.
The normal response for processors of paying more for what they need could reach a point where that is no longer feasible and plants have to make closure decisions, Mr Gidley-Baird said.
That could have long-term effects, he said.
“It’s a fine balancing act between paying more than you are comfortable paying for cattle and shutting down, potentially losing a labour force that will be very difficult to rebuild,” he said.
“The same thing happens from a feedlot point of view.
“The biggest question is how much volume are we potentially going to lose out of the system and no one really knows the answer to that.”
Female slaughter this year has been 20 per cent higher than last year, which would suggest some legacy in terms of less production in the following years.
However, in 2014/15 when there was high female slaughter, expected huge production drops did not follow, Mr Gidley-Baird said.
Indeed, agents regularly say when the prices are right, the cattle somehow appear, despite what official herd figures might indicate.